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Saturday, August 2, 2014

Saturday, 8/2/14 update

The current preferred count has the ES in Inter W4 of Major W5 up off the Feb 5 low at 1732.00.  Inter W2 was a flat, so by rule of alternation Inter W4 should be either a zig-zag or triangle.  So far the ES shows 3 waves down from the Inter W3 top at 1985.75 on Jul 24, so if the low for Inter W4 is in place or near at hand the EW requirements for the move have been met.

The internal count for the move off the Jul 24 top has Minor wave "a" bottoming at the 1960.75 low of Jul 28, wave "b" top at the 1979.50 high of Jul 29 with Minute waves 1 thru 3 of Minor wave "c" complete into Friday's 1910.25 low print.  If correct the move only needs Minute waves 4 & 5 to complete Minor wave "c" and thus Inter W4.
First possible target for the correction is at 1904.50 where Minor wave "c" will be 3 x Minor wave "a".  There is also a "volume hole" at 1904.25 (see chart below).  Next possible target is at  1894.50 which represents a .50 retrace of Inter W3.

Longer term perspective shows the ES moving towards the conclusion of the current bull market which commenced at the Oct 2011 low at 1068.00 - close to 3 years in duration and a doubling in price, quite an impressive run.

Concerning the current sell-off, a price level of significance is at 1887.50.  This is the peak of Inter W1 in the preferred count.  If the ES continues dropping and pierces down through that level there will be a 4th wave overlap of wave 1, which is an EW no-no.  In that eventuality the possibility that Primary W III has already topped at the recent highs becomes the preferred count as per the below alternate.  If the Primary W III top is in place then the market is at the very early stages of a deeper and more severe bear market than has been seen since 2011 when the ES dropped over 25% in the space of a few months.


Finally I'd like to share some work with not a lot of description (it's late PM Saturday) but which may be of interest.  I have a proprietary market indicator that was 1st developed in the mid 1980's which is dubbed "Al's Indicator".  The data base for the indicator was originally in a Lotus spreadsheet and was then migrated to Excel.  In the last couple of years my trading/charting platform (TOS) has made the base data used in the indicator's formula available.  A TOS routine was written to use that data to generate Al's Indicator in their platform.  The original indicator had 3 variables in the formula, and it was cumbersome to manipulate those variables using an Excel spreadsheet.  However, expressing the indicator in the TOS trading platform allowed for easy variation and testing of the inputs, so I've been playing with that.  The below chart shows "Al's Indicator" against the NYA with three different variable sets.  As I said I'm not going to spend a lot of time discussing the chart, but I'd like to point out that the 1st variation (which is the original in terms of variables) has the market in buy territory as defined by this indicator. 

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